Your company (rated A3) just issued new debt with 8 years to maturity this morning. In the
Question:
Your company (rated A3) just issued new debt with 8 years to maturity this morning. In the middle of the day, ACQUIRER CORP (rated Baa2) announced a takeover offer for your company. Market participants thought the deal would go through and existing bonds issued by your company would get re-rated to Baa2. The coupon rate of your company's newest bond issue was set at 3.0%, but yields on similar maturity corporate bonds with an Baa2 rating are currently at 4.0%. Assuming the new bond will make semi-annual coupon payments, what price will the bond likely trade at after the downgrade? Enter your answer with at least 4 decimal places. Do not include a negative sign. Assume 100 face amount.
Chemistry The Central Science
ISBN: 978-0321696724
12th edition
Authors: Theodore Brown, Eugene LeMay, Bruce Bursten, Catherine Murphy, Patrick Woodward